Still Working? Here's Why You May Not Want to Claim Social Security Early

Age 62 is the earliest age to sign up for Social Security. Because of this, a fair number of seniors aim to wrap up their careers at 62, file for benefits, and kick off an early retirement.

You, however, may decide to keep working for many years once you're eligible to collect Social Security. And there are definitely advantages to going this route. But if you're going to be working during your 60s, you'll need to be very careful about claiming Social Security early.

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What's early for Social Security purposes, anyway?

For the context of this discussion, claiming Social Security early means filing for benefits before having reached full retirement age (FRA). That age hinges on your year of birth. You can take a look at this table to see what your FRA is if you don't know it already.

Data source: Social Security Administration.

You should also know that if you sign up for Social Security before reaching FRA, you'll generally lock in a lower monthly benefit for life. For some people, that hit is worth it to get their money sooner.

But if you're going to slash your monthly Social Security benefit for life, then you might as well actually get to collect that entire benefit once you sign up for it. And if you're still working, that may not happen.

Be mindful of the earnings-test limit

You are allowed to collect Social Security if you're still working and earning money from a job. And once you reach FRA, you don't have to worry about how much money your job is paying you, because you still get your monthly Social Security benefit in full. But if you're working and collecting benefits before FRA, you'll need to pay attention to the earnings-test limit that applies to you.

That limit changes every year. In 2024, for example, you can only earn $22,320 before having your wages affect your Social Security benefits. Beyond that income threshold, you'll risk having $1 in Social Security withheld per $2 of earnings.

That limit is much higher if you'll be reaching FRA in 2024. In that case, it's $59,520. From there, you'll risk having $1 in Social Security withheld per $3 of earnings, not $2. But either way, if your wages are such that they exceed the earnings-test limit, then you may want to reconsider claiming Social Security early.

By taking benefits before FRA, you'll generally reduce your monthly payments for life. But if you're not even going to be able to get those payments in full because you earn too much money, then frankly, what's the point?

Of course, it may be that you're working part-time because you can no longer handle full-time work, but your wages aren't enough to cover your expenses in full. In that case, an early Social Security filing may be unavoidable. But if you have some savings to tap, in that situation, withdrawing from your nest egg could be worth it. You'd be able to hold off on claiming Social Security and reducing your monthly benefit in the process.

You should also know that withheld Social Security income under the earnings-test rule isn't forfeited forever. You do get that money back once you reach FRA. But because claiming Social Security ahead of FRA generally results in a reduced monthly benefit for the duration of your retirement, you may want to think twice about filing for benefits early if you're still an active member of the labor force.